August 18, 2019 15:46

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Reducing taxes to reduce burden for businesses

10:08 | 10/08/2019

VCN- The Government has approved a proposal bythe Ministry of Finance to apply corporate income tax incentives for small and micro businesses.

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Mr. Dau Anh Tuan, Head of the VCCI’s Legal Department.

Although this is not the first time that the Ministry of Finance has proposed tax incentives for this business group, this is still good news for hundreds of thousands of small and micro businesses. Customs newspaper speaks with Mr. Dau Anh Tuan, Head of the Legal Department at the Vietnam Chamber of Commerce and Industry (VCCI), aboutthis issue.

According to the proposal bythe Ministry of Finance, the corporate income tax rate for small and medium businesses has been reduced to 15-17%, instead of the current rate of 20%. How do you assess this proposal of the Ministry of Finance?

I think this is good news for small and micro businesses. Finally, the tax reduction process for this group of businesses that has been implemented in accordance with the Law on Support for Small- and Medium-sized Enterprises has achieved positive results.

Recently, the draft Law on amending and supplementing Tax Laws includes: Value Added Tax Law, Corporate Income Tax Law, Personal Income Tax Law, Special Consumption Tax Law, Natural Resources Tax Law, the Law on Import and Export Tax in which this content has been delayed. Therefore, with the separation of content on tax incentivesfor this business group to issue the Resolution of the National Assembly and to realize this key policy is the correct direction of the Government and the Ministry of Finance.

Regarding the income of small and micro businesses, the tax reduction of 3-5% is insignificant. What do you think about this issue?

In fact, according to statistics bythe General Department of Taxation, only 50% of operating businesses have income to pay the Corporate Income Tax.

However, all of these businesses are suffering from other burdens, including costs of records, procedures, accounting, rental and compliance with other conditions. Therefore, the reduction of corporate income tax is a positive solution for small and micro businesses and reduces burdens for this business group.

For business households, tax incentive policies will be motivation for them to develop intobusinesses. Do you think that this motivation is sufficient to promote business households?

The transformation from business households to official businesses is a key policy of the Government. However, after nearly two years of implementation, this process has not been as fast as expected. The number of businesses in localities that havetransformed from business households is insignificant. The reduction in corporate income tax is expected to be a key motivation to accelerate this process.

I also highly appreciated the promulgation of Circular 132/201 8/TT-BTC of the Ministry of Finance at the end of 2018 to instruct the accounting regime for small and micro businesses. This circular has also contributed significantly to the process of promoting business households to transform into businesses.

However, I am not optimistic that this tax reduction is enough to create a wave of this tranformation. Business households are afraid to become to businesses because the procedures for operation as a business model is more complicated, more expensive, more risky and must also meet conditions on labor, safety, fire prevention and environment protection. Meanwhile, with the model of household business, these regulations and procedures are much simpler.

In order to accomplish the goal of 1 million businesses by 2020, what do the Government and the Ministry of Finance need to do to support and encourage business households to become businesses?

Currently, there are nearly five months left of 2019. From now to the end of 2020, there are only two years. According to statistics fromthe Ministry of Planning and Investment, the number of businesses by the end of 2018 was 715,000. The number of newly established businesses in recent years is about 130,000businesses. Therefore, to achieve goal of 1 million businesses assigned by the Government is a great challenge. Theoretically, it can be achieved but it needs drastic solutions.

Recently, the Ministry of Financehas been a leading unit in reforming administrative procedures and cutting costs for businesses. Policies issued by the Ministry of Finance have had a great impact on the business community. I hope that the Ministry of Finance will further promote this work, especially the reforms by the Ministry will accelerate Vietnam's reforms in the future.

According to a proposal bythe Ministry of Finance, the corporate income tax rate for small and micro businesses shall reduce to 15-17% instead of the current rate of 20%. Accordingly, the tax rate of 15% shall apply to businesses with annual turnover of less than VND 3 billion and having an average number of employees participating in social insurance not exceeding 10.

The tax rate of 17% shall apply to businesses with a total annual turnover of VND 3 billion and less than VND 50 billion and having an average number of employees participating in social insurance not exceeding 100.

To avoid enterprises establishing subsidiary companies to enjoy the tax incentives, the Ministry of Finance proposed not to apply the tax rate of 15% and 17% to subsidiary companies, associated companies which are not small and micro businesses, and businesses not subject to tax incentives according to provisions of the Law on Corporate Income Tax.

The Ministry of Finance also proposed to exempt corporate income tax withintwo years from the time of having taxable income for newly established enterprises from business households and individuals.

The Ministry of Finance pointed out the negative impact of tax reduction and exemption for businesses is that it can reduce budget revenue by about VND 9,200 billion/year.

By Ngoc Linh/Ngoc Loan